A recent open letter to the President of Senegal has emphasized the need for substantial reforms to strengthen fiscal discipline, transparency, and public trust. The letter, written by an expert, highlights that despite 20 loan agreements with the International Monetary Fund (IMF) since 1979, Senegal has not achieved sustainable, inclusive growth. The IMF has recently announced a staff-level agreement with Senegal for a loan of approximately $2.2 billion under its Extended Credit Facility.
The letter identifies two main causes of Senegal's economic difficulties: rent-seeking practices and a lack of comprehensive financial information. Rent-seeking involves individuals using public institutions for personal gain rather than creating economic value. The IMF has previously noted that rent-seeking is an obstacle to reforms and transparency in Senegal. Additionally, the country lacks a complete and reliable picture of its financial situation, including its assets, debts, and net worth.
The IMF has pointed out that Senegal's accounting practices do not allow for the establishment of the government's net worth. In 2018, the IMF noted that significant portions of state assets, resources, and financial commitments were absent from official reports. This issue persists despite substantial administrative capacity and external support. The World Bank has invested $45 million in a public finance management project from 2011 to 2019, but the results were deemed "moderately unsatisfactory."
The letter suggests that the combination of opaque public finances and rent-seeking practices leads to unjustified tax exemptions, inflated public contracts, and misappropriation of public resources. These actions primarily affect vulnerable citizens, who face a higher cost of living, degraded public services, and a decline in their standard of living. The expert argues that a crisis can be an opportunity to implement reforms that would otherwise be politically challenging.
The letter proposes five emblematic reforms to mark a significant break with past practices and establish the foundations of budget visibility, transparency, and integrity. The first reform involves eliminating unjustified tax exemptions, which have been a concern for the IMF for over a decade. According to official figures, the cost of these exemptions increased from 750.3 billion FCFA in 2019 to 952.7 billion FCFA in 2021.
The expert recommends creating an independent commission to review all existing tax exemptions, publish their beneficiaries, and recommend the cancellation of any exemptions that do not yield public benefits. This measure aims to ensure that every franc allocated through unjustified exemptions is compensated by ordinary taxpayers or reduces public services. The commission's work would enhance transparency and accountability in Senegal's tax system.
Implementing these reforms is crucial for Senegal to achieve sustainable economic growth and improve public trust. The proposed measures address long-standing issues that have hindered the country's development despite significant external support. By enhancing fiscal discipline and transparency, Senegal can create a more equitable and prosperous society for its citizens.
Key points
- The expert recommends eliminating unjustified tax exemptions.
- An independent commission should review and publish beneficiaries of tax exemptions.
- Enhanced transparency and accountability are essential for Senegal's economic growth and public trust.
